Individuals – Underpayment Penalty
The United States income tax is a pay-as-you-go tax, which means that tax must be paid as you earn or receive your income during the year. You can either do this through withholding or by making estimated tax payments.
If you do not pay enough tax, you may have to pay a penalty for underpayment of estimated tax.
Taxpayers who fail to pay sufficient tax during the year may be subject to the underpayment of estimated tax penalty. In general, the penalty can be avoided if the taxpayer:
- Owes less than $1,000 after subtracting withholding and refundable credits from their total tax liability;
- Paid at least 90% of the current year’s tax liability; or
- Paid 100% of the prior year’s tax liability (subject to applicable safe harbor rules), whichever requirement results in the lower payment threshold.
If you did pay 100% of your tax liability from the previous year, you would need to fill in that information in the program by using the following directions.
TaxAct Online
Dashboard
- From within your TaxAct return, click Taxes & Miscellaneous.
- On smaller devices, click the menu at the top left corner of your screen, then make your selection.
- Click the Additional Tax Payments drop-down.
- Click Add beside Underpayment Penalty.
- Complete the rest of the interview process.
Classic
- From within your TaxAct return, click Federal.
- On smaller devices, click the menu at the top left corner of your screen, then make your selection.
- Click Underpayment Penalty near the bottom of the list.
- Complete the rest of the interview process.